The year 2021 is wrapping up and in this article we introspect and look at the possibilities of the year ahead.
This year was more a challenging year than it was a cheerful one but for the local economy and part of the global one, there were some gains to be celebrated and consolidated as we move forward.
The biggest challenge facing the world at the moment and indeed for the entire 2021 year was Covid-19. In the first half of the year, record numbers of vaccinations were recorded mostly in Western countries. The East and South which are mostly parts of Asia and Africa grossly lagged behind on vaccinations, hence remaining highly vulnerable. Generally, the ability of the medical fraternity to produce vaccines which were mostly effective against most of the varying variants, was in itself a success.
Adjustments to the new normal ushered in higher business volumes to sectors which were more flexible and highly adaptive to the new environment, but it punished those that were inherently rigid and highly susceptible such as tourism, air travel and oil production and related sectors. The payments sector grew phenomenally on the backdrop of enhanced volumes and high adoption.
Online media and services generally benefited as human interaction shifted to digital platforms. This has been the new normal under Covid-19.
It remains heart wrenching that Covid-19 deaths for the year came in at higher levels compared to the prior year. This is despite the increased production levels of vaccines. The relatively higher death rates point to a number of factors, notably that there is a high level of vaccine inequality among the rich and poor countries. Rich countries have hoarded the vaccines, despite achieving high levels of vaccinations.
A number of first world countries are closer to head immunity and therefore enjoy lower risk of infection and sickness from the Covid-19 pandemic compared to Third World countries. The distribution phenomena stems also from the ability by richer countries to outcompete poorer countries in bidding for vaccines. Most of the vaccine producers are domiciled in the West and it is quite natural to tell their affinity. Richer countries should realise earlier that the entire world is not safe until vaccines reach out to marginalised states.
The emergence of Omicron, first discovered in South Africa about a month ago, attests to the vulnerability of the entire world given the uneven distribution of vaccines. Zimbabwe largely relied on Chinese and Indian made vaccines and despite missing the year end target, remains one of the countries with the highest vaccination rates on the African continent.
Outside of the availability of vaccines, Africa remains with the challenge of convincing its people to take up the available vaccines. This challenge is as a result of low education levels on the continent which makes citizens susceptible to misinformation. African governments will need to do more in 2022 to convince their people to get vaccinated.
Agbiz/IDC Agribusiness Confidence Index rebounds in Q4, 2021
Businesses faced existential threats across the board as governments invoked measures to restrict movements through lockdowns. While this is a general assertion, some segments of the market recorded higher than pre-pandemic sales levels. For Zimbabwe in particular, the country’s mining sector benefited from higher commodity prices on the global levels. Gold, which was a big mover in 2020, carried over its momentum into 2021, although the gains were cut.
The biggest winner in the commodities space was the platinum group of metals (PGMs). PGMs are now Zimbabwe’s largest export commodity ahead of gold and the biggest producer is Ngezi-based and ASX-listed miner Zimplats. The company posted more than US$1 billion in revenue for the first time in 2020. This was huge, not only for the company but for the country in general, given the persisting forex challenges.
Outside of minerals, a good agriculture performance helped increase aggregate demand across other value chain sectors such as food manufacturing. The country also benefited from a generally stable macro environment compared to the prior two years. The availability of forex increased while the general price levels trended southwards for most of the year. We highlighted and warned throughout the stability period that the gains were not sustainable as economic fundamentals remained out of shape. Our conclusion from a research perspective was that the RBZ enjoyed unfettered control of the exchange market and hence easily fixed the rate, thus faking stability. A run on the currency in the late part of the year demonstrates that the market indeed has fundamental flaws.
The challenges of the interbank market are likely to carry over into 2022 given that there is no willingness on the part of the government to change tact. It will also become even more difficult for the government to change course given the impending elections in 2023. Business should therefore brace for more forex related challenges into 2022, which are as a result of low confidence and high government expenditures. Outside of these challenges, the year ahead will again bring to the fore the aspect of digitalisation.
Assuming higher vaccinations and reduced Covid-19 infections, the new normal will largely entail a shift and assertion of new ways of doing business. Companies should embrace accelerated disruption and innovation from rivals and totally new entrants to respective fields from agriculture to banking.
A race at the top around Metaverse shows the direction interaction in business is heading as we go into 2022. With Metaverse there is enhanced virtualization of ICT to spur virtual interaction which have powered hybrid and work from home environments. More business will challenge past models and it is likely that hybrid environments are here to stay. This entails a shift in work strategies and high investments in ICT and human capacity building in the respective area.
Outside of the workforce, operations will also continue on a disruptive path from retail, production to service. We are talking about digital warehousing and shop floor management, virtualization of production processes and automation of service sector systems. Other aspects of business to be disrupted include marketing, where social media is taking over. Enhancements of platforms and interactions will position first movers.
Outside of the ICT realm, companies will need to evaluate much quicker the impact of Covid-19 on consumer tastes and preferences, in respect to their businesses. This study goes beyond what has been highlighted above and gives a more informed and focused approach in dealing with the emerging dynamics. The green economy is no longer just a fancy phrase but a reality which has to be dealt with. Businesses that are environment friendly and focus broadly on sustainable practices are likely to remain competitive into the future. Investors are moving more and more into benchmarking companies based on their practices in ESG matters. These factors need to be inculcated into companies mid-to-long term plans to assert longevity.
Zimbabwe’s corporate world will also have to deal with a pertinent issue around succession. The average age of the CEOs of the top six companies listed on the New York Stock Exchange is 50,6 years, with the youngest, Mark Zuckerberg only at 37 years of age. The top ZSE-listed companies have an average CEO age of 58 years. This variance is despite that Zimbabwe companies are very small and that most of the local companies have been in existence for long, compared to Tesla and Facebook. While the younger may have to disrupt the industry led by the older generation and lead their own entities, the existing companies have to wise up and anticipate the shift in tide and possible risk associated with old guard, to prudently identify younger tech-savvy and able personnel to lead their entities.
The younger blood is able to bring in new cultures, be acquainted with the fast shifting technological terrain, be more engaging on social platforms and able to attract through understanding, a tech-savvy emerging, Z-Generation. There exists a lot of red tape in local corporates and a lack of appreciation of the shifting terrain, which could catch most businesses unaware and thus push them out in the not so distant future.
